One of BondMason's many SIPP clients provides an overview of his Self Invested Personal Pension
With the interest rates for savers being kept at historic lows, savvy savers are looking for new ways to make their money work for them. Many are attracted to invest in the alternative finance sector as a way of ensuring their investment portfolio earns larger returns with a relatively low risk profile.
Peer-to-peer lending, which is also known as direct lending, is a rapidly growing market and with returns of 8 per cent or more, it is easy to see why it can be attractive. Nevertheless, navigating this sector can be time-consuming. The more you look the more you see.
John*, now a board advisor working primarily with government organisations, was looking for a way to diversify his investment portfolio for retirement planning. Having already invested in traditional equity and bond holdings, he was looking for a way to expand his portfolio when his interest was piqued by the peer-to-peer and direct lending sector.
At the time, a traditional longer-term savings account would only yield in the region of 2 to 2.5 per cent. His aim was to diversify his portfolio and simultaneously earn a higher rate of interest.
John says. “A few years ago, I decided that I wanted to diversify my asset mix, particularly given the highly volatile core market moves which I experienced personally in 2008, whilst working in investment banking” John explains. “That made me look around the market and investigate peer-to-peer lending.”
He dedicated several months to investigating the sector and found a bamboozling range of potential opportunities. The more he looked, the more he found. But sorting the good from the risky was a different matter.
“Having spent a bit of time looking at around 20 to 25 investment platforms, I decided that there were seven or eight that I wanted to deal with in the first instance, given the nature of the lending profiles and returns involved. It was quite a job!” John says.
He continues, “I was also aware that there were 100 or more further platforms that could be of potential interest to me. I simply didn’t have the time to look thoroughly at them all. For someone without financial sector experience, it would be even more time-consuming.”
John discovered BondMason during his research and was immediately impressed that it gave him access to a wide spread of lending platforms, as well as access to direct lending opportunities which could not be sourced elsewhere.
As a cautious investor exploring the range of lending opportunities, John wanted experts on hand who would be responsive to his questions and transparent about how his funds were protected and managed.
“I spent around three months considering whether to invest with BondMason,” he says. “I had some fascinating discussions with its CEO Stephen Findlay and I found him to be open and transparent when answering any questions I had. He would always get back to me – if he didn’t know an answer at a particular time, he would be honest about that and follow up in due course.”
At the beginning of 2017 John became a client and his relationship with the BondMason team has prospered, with his increasing investment with the firm yielding a gross return (before fees) of over 8%.
John has gone on to hold his BondMason investments in a SIPP (a Self-Invested Personal Pension), which is a type of pension allowing the benefits of a tax-efficient structure combined with the ability to have control of a range of investments. The SIPP with BondMason was arranged through one of the company’s approved SIPP administrators.
“As I began to invest I found their responsiveness was very good,” he says. “From a personal perspective, BondMason provides a clear view on risk and, in particular, they acknowledged default issues and recovery management as part of the lending life.
“For me it is important to understand whether the lending could involve a lot of investor default and recovery risk, and how this is going to affect returns. BondMason was transparent in their assessment of platforms and provided a wide range of risk and diversification related statistics.
“I also visited their offices and was able to meet the team. They run a very tight operation and have a really strong belief in what they are doing. In my view they are well worth backing.”
*The client has asked to remain anonymous and therefore his name has been changed.
Nothing in this article should be construed as advice. Your capital is at risk.